THE NUMERUS CLAUSUS PRINCIPLE IN CONTEMPORARY AUSTRALIAN PROPERTY LAW BRENDAN EDGEWORTH* The numerus clausus principle is one of key metaprinciples of the property law of common law systems. It refers to a 'closed list ', or a set menu, ofjnite types ofproperty rights. In land law, it limits the number to less than a dozen comprising the estates, the servitudes and the security interests. The rationale that underpins this metaprinciple is the idea that by simplzhing the range ofrights, it is easierfor prospective purchasers to discover how rights over land have been fragmented. This article examines the contemporary application of the numerus clausus principle in recent Australian case law. It argues that while historically it may have operated to impose an optimal standardisation on the number ofproperty rights, it now unduly restricts the developmeizt of property law. The basic reason .for this is that cheap and eflcient registration systems have substantially removed the problem the numerus clausus principle was originally meant to solve. These systems not only make it comparatively easy to discover idiosyncratic packages of rights over land, but it forces those who create them to register if they are to be enforceable against third parties. I INTRODUCTION In recent years Australian courts have offered emphatic affirmation of a fundamental policy underpinning the property law of all common law jurisdictions. Conventionally described as 'the numerus clausus principle" - in English, the 'closed list' principle - it expresses the stringency of the common law's approach to property rights, particularly over land.' In essence, the principle holds that landowners are not at liberty to customise land rights, in the sense of re-working them in an entirely novel way to suit their particular individual needs and circumstances. Rather, any new rights must fit within firmly established pigeonholes, of which the law permits only a small and finite number. The principle applies regardless of the terms of any agreement that parties might reach for the purpose of creating such an interest, so it is irrelevant that a specific contractual arrangement to create a wholly novel interest might be free and fair. It is also quite beside the point that the objectives expressed in that agreement * Associate Professor, School of Law, University of New South Wales. John Henry Menyman, 'Policy, Autonomy, and the Numerus Clausus in Italian and American Property Law', (1963) 12 American Journal of Conzparative Law 224-31; William Swadling, 'Opening the numems clausus' (2000) 116 Law Quarterly Review 354. Though most commonly referred to as a principle governing land law, it also applies to other forms, such as intellectual property. See, eg, Victoria Park Racing and Recreatiort Grounds Co Ltd v Taylor (1937) 58 CLR 479, 509 (Dixon J). The focus of this paper is confined to land law. 388 Monash University Law Review (Vol 32, No 2 '06) might be mutually convenient, highly desirable or economically efficient. In this respect, property law is highly prescriptive: the system of rights in rem is a strictly circumscribed one, with a tight regulatory regime governing the range and form of available rights over land. By contrast, parties may agree to bind themselves contractually to any type of arrangement of rights and responsibilities. Contract law, with its inbuilt principle of free exchange, displays none of the restrictiveness of property law when confronted with new packages of rights. In only the most extreme circumstances, such as where the contract involves illegality, will contractual provisions be struck down. In the celebrated pronouncement of Lord Brougham LC in 1834, in the case of Keppell v Bailey, contract law allows parties 'the fullest latitude' when formulating rights and obligations as between themselves over real and personal pr~perty.~Property law adopts a very different approach; for it is concerned not so much with rights between parties to agreements, as with those rights that are capable of binding third parties. Accordingly, the numerus clausus principle prevents rights that do not fit neatly into the recognised categories of corporeal and incorporeal hereditaments from entering the pantheon of proprietary interests. A clear doctrinal gulf therefore separates property and contract: expansive freedom of contract allows parties to fashion rights over land at will, while property narrowly limits the kinds of rights that may attach to the land so as to bind successors in title. This paper will outline the origins of the principle in 19th Century English case law, as a prelude to an analysis of the general policy considerations that inform it. The paper will then critically examine the relevance of the doctrine to contemporary land law. Finally, the paper will chart how recent Australian case law in the areas of licences, freehold covenants, easements and profits a prendre demonstrates the principle at work in all its rigidity. My general argument is that the strictness of the common law approach to recognising new interests in land is eminently defensible in a regime of old system, or common law, conveyancing, given the inefficiencies that intrinsically afflict it, and the attendant difficulties faced by third parties when seeking to the discover all relevant interests affecting land. In this context, the numerus clausus principle has represented a valuable boundary rule for property law, allowing a fixed, yet moderate, number of estates and interests to exist. To put this point in the language of economists, the principle can be seen as one that has advanced the policy of 'optimal standardisation' of property righh4 But for all it is worth from an historical perspective, I will argue that that particular rationale for the principle is growing obsolete. It loses a great deal of (1834) 2 M & K 517 at 536; 39 ER, 1049. Thomas W Menill and Henry E Smith, 'Optimal Standardization in the Law of Property: The Numerus Clausus Principle' (2000) 110 Yale Law Journal 1, 69. The Numerus Clausus Principle in Contemporary Australian Property Law its force where interests in land are established and protected by means of recordation on state-owned registers of land titles. Where those registers operate effectively, by containing a complete record of- interests, and prove easy and cheap to access, the less need there is for a strictly delineated numerus clausus. Furthermore, different forms of registers operate with different degrees of efficiency and user-friendliness. Their relative strengths in these respects will be compared. The general conclusion I reach is that to the extent to which different land title registers displace - from lesser to greater degrees - the general law doctrine of notice, the case for the numerus clausus principle in its present form is progressively weakened, and that the present number of allowable property interests has become significantly, and increasingly, 'sub-optimal'. II THE NUMERUS CLAUSUS PRINCIPLE: ITS NATURE, ORIGINS AND POLICY BASIS According to Bernard Rudden, the term numerus clausus refers to 'a restricted list of entitlements which [the law] will permit to count as property interests, or "real right^"'.^ In a lengthy comparative study, he found that virtually all modern, that is to say, post-feudal, legal systems operate with a closed list of recognised proprietary rights. Civil law jurisdictions are marked by this foundational arrangement no less than the common law systems. Rudden identified 'less than a dozen' categories of entitlement to land.6 They are those that confer possession, namely the estates: the fee simple, the life interest, and the leasehold. Then follow interests often referred to collectively as the 'servitudes', such as easements, profits, and restrictive covenank7 Finally, come the security interests: mortgages and other charges. To rank as an interest in land, a right must come within one item on this menu of interests. If not, it will fail to be enforceable as property; and that means it will be impotent against successors in title, even if they have full knowledge of its existence at the time they acquire their interest. The same closed list is roughly applicable in Australian law. So, the fullest interests in land, conferring possession of the land for various periods of time, from the infinite all the way down to the short fixed-term, are the estates: fee simple, life estate and lea~ehold.~Then follow the lesser interests: easements, freehold covenants and profits, and finally the security interests, such as mortgages. A parallel measure of the breadth of the numerus clausus is evident in recent case law where courts have been offered the opportunity to particularise these interests in the context of interpretation of statutory provisions that refer to Bernard Rudden. 'Economic Theorv v Pro~ertvLaw: The Numems Clausus Problem' in John Eekelaar and ~ohnBell (eds), onfor;?~ssa; in >urisprudence (1987) 239, 239. Ibid 255. ' This practice derives from Roman law, and is common in the United States: ibid 242. Note that in South Australia, Tasmania and Victoria dinosaurs may still stalk the earth in the form of the fee tail: Estates Tail Act 1881 (SA); Land Titles Act 1980 (Tas) s113; Properg Law Act 1958 (Vic) ss 250 and 251. 390 Monash University Law Review (Vol32, No 2 '06) 'interests in land'. In Hornsby Council v Roads and TrafficAuthority of'NSW,' Meagher JA concluded that the phrase 'any interest in land' contained in section 4 of the Land Acquisition (Just Terms Compensation)